Hydrocarbon Gas Liquids (HGLs), Ethanol Consumption Grows

The latest Energy Information Administration’s (EIA) Short-Term Energy Outlook (STEO) forecasts that in 2021, U.S. consumption (as measured by product supplied) of total petroleum and other liquid fuels will average 20.71 MMbbld, surpassing the 2007 pre-recession level. However, since the 2007–09 recession, the fastest-growing components of U.S. liquids consumption growth have not been fuels such as motor gasoline or distillate fuel but rather hydrocarbon gas liquids (HGLs) and ethanol, two components that are mostly or nearly entirely produced outside of petroleum refineries. Petrochemical facilities consume HGLs as feedstocks in the growing production of plastics, resins, and other materials; ethanol is blended with gasoline.

HGLs and ethanol consumption have collectively grown from 2.6 MMbbld in 2007 to 4.1 MMbbld in 2019. The remaining portion of total petroleum and other liquids consumption—nearly all of which comes from petroleum refineries—has fallen from 18.0 MMbbld 2007 to 16.4 MMbbld in 2019. In 2021, EIA forecasts that U.S. demand for principally refinery-produced products will average about 16.3 MMbbld, similar to its 1997 level.

Hydrocarbon gas liquids, a group of products that includes ethane, propane, normal butane, isobutane, natural gasoline, and refinery olefins, have been the main driver of U.S. petroleum and other liquids demand growth since 2007. Domestic production and consumption of HGLs have increased with rising natural gas production and rising petrochemical sector demand. As a result, EIA forecasts U.S. HGL consumption will average 3.45 MMbbld in 2021, or 1.27 MMbbld more than in 2007.

EIA expects less U.S. consumption of refinery-produced products in 2021 than in 2007, except for jet fuel. As an example, declines in the use of fueloil for space heating and transportation efficiency gains have limited the increase in distillate consumption in the U.S. Consumption of the petroleum-based component of U.S. motor gasoline has yet to surpass pre-recession levels because of increased vehicle fuel efficiency and increased blending of ethanol, which is almost exclusively produced outside of petroleum refineries. EIA forecasts that the U.S. will consume 57,000 bbld less refinery-produced gasoline in 2021 than in 2007, but ethanol consumption will be 49,000 bld greater.

Some HGLs can be produced by both crude oil refineries and natural gas processing plants. HGL production at natural gas processing plants has risen along with U.S. natural gas production. EIA expects HGL production from natural gas processing plants to continue to increase to 5.5 MMbbld in 2021. Meanwhile, refinery HGL production has remained flat in recent years at about 600,000 bbld.

The large increase in U.S. HGL production and the resulting low prices have led to large investments in U.S. infrastructure to extract and transport HGLs to market as well as investments in petrochemical facilities to consume HGLs. Many of these facilities consume HGLs as feedstocks in the production of plastics, resins, and other materials.

SOURCE: The Weekly Propane Newsletter, March 12, 2020. Subscribe to receive all the latest posted and spot prices from all major terminals and refineries around the U.S., featuring a center spread of posted prices that includes hundreds of postings completely updated each week, market analysis, insightful commentary and more.